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Telkom sues SA's president to stop investigation

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South African telecoms operator Telkom is suing the country's President Cyril Ramaphosa to stop an investigation into some of its deals across Africa going back over 15 years.

The case is in response to Ramaphosa's directive back in January 2022 for the country's Special Investing Unit (SIU) to launch a wide-ranging probe into old deals, including failed forays into Nigeria and Mauritius.

Telkom believes Ramaphosa's actions were unconstitutional.

The SIU's investigation is supposed to look into alleged maladministration in Telkom's sale of iWayAfrica, Africa Online Mauritius and Multi-Links Telecommunications Limited.

Telkom filed papers in the High Court in Pretoria on Monday. Connecting Africa has seen the founding affidavit, which states that the operator's case has two parts.

Part A is a request to interdict the SIU from continuing with the investigation pending the finalization of Part B.

"Part B seeks to declare unconstitutional, invalid, and of no force or effect the Proclamation issued by the President which instructs the SIU to investigate allegations of maladministration and impropriety at Telkom," Telkom's acting group executive for legal services, Chris Teurlinckx, said in the affidavit.

Telkom claims it will "suffer irreparable harm" should the SIU continue its investigation pending the review of Part B of the application.

The affidavit names the respondents in the case as the President of the Republic of South Africa, the SIU, the Minister of Communication and Digital Technologies [of South Africa] and Edward Scott, who is the director of Phuthuma Networks.

Telkom claims the allegations stem from complaints made by Scott about two tenders put out by Telkom in 2005 and 2007, which it said it never awarded.

Costly consequences

The president's interest in Telkom's operations and deals is because the SA government owns a 40% stake in Telkom and the Public Investment Corporation (PIC) – which manages state pension funds – owns another 14% of the telco.

In January, Ramaphosa said that the SIU investigation pertained to any losses that Telkom or the state suffered that may be recovered.

However, Telkom said in its affidavit that it "is not a state institution, does not use public money or control state assets or public property" and that the investigation is unlawful because Telkom does not fall under the SIU Act like other state-owned enterprises would.

"Telkom further submits that the President acted without grounds, irrationally, arbitrarily and for purposes not authorised by the SIU Act by authorising investigations into vague allegations, formulated and cast in the widest possible terms, covering a period of some 15 years. He also failed to take into consideration that some of these allegations have been fully investigated before and there is plainly no rational purpose to a fresh investigation," Teurlinckx said.

Telkom also argued that the president's decision to start the investigation had "wiped out significant value for Telkom," which is listed on the Johannesburg Stock Exchange, and has also caused "billions of rands in shareholder value" to be lost.

"The president could not have been unaware of these consequences when he decided to instruct the SIU to investigate Telkom," Teurlinckx added.

Multiple missteps

The investment missteps include deals that the operator made over a decade ago. Telkom bought 75% of Nigerian Multi-Links in 2007 for US$280 million, and then took over the company completely in 2009 for an extra $130 million. However, the asset proved to be a major money loser and two years later was sold for just $10 million.

In 2007, iWayAfrica was formed when Telkom bought MWeb Africa and amalgamated it with Africa Online Mauritius. But the business performed poorly and Telkom sold it in 2013, saying it had become "an immaterial part of the Group."

Telkom responded back in January to the government probe, saying that all of the matters relating to the transactions were already on the public record and had been investigated and dealt with.

"Telkomís own investigation flagged possible cases of wrongdoing by two employees in one of these transactions and declared this in terms of the Prevention and Combating of Corrupt Activities Act. Telkom issued civil summons against an employee with an eye to recovering losses amounting to $5 million relating to activities incidental to the transaction," the telco said at the time.

Court conflicts

Telkom is no stranger to South Africa's legal system and recently had a lengthy court battle with South Africa's telecoms regulator, the Independent Communications Authority of South Africa (ICASA), over the country's spectrum auction.

The case was settled in April after the spectrum auction went ahead in March.

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The SIU investigation could also impact discussions that Telkom is having with fellow operator MTN, which has expressed interest in buying Telkom.

The Presidency of South Africa did not respond to a request for comment on the court case by the time of publication.

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*Top image is of South African President Cyril Ramaphosa. (Source: GovernmentZA GCIS via Flickr)

— Paula Gilbert, Editor, Connecting Africa

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